The tax multiplier is negative because an increase in taxes ------- disposable income, which then -------- consumption and GDP.
The multiplier for government spending can be calculated using which formula?
Spending and Tax Multiplier:
In the Simple Keynesian Cross models, a given change in exogenous government spending and taxes have a more than proportionately impact on equilibrium income. These effects are captured by the fiscal multiplier and the tax multiplier. Both of them depends on the consumers's marginal propensity to consume.
Answer and Explanation:
The answer is a).
All else the same, an increase in tax decreases disposable income, because disposable income is equal to income minus...
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from Economics 102: MacroeconomicsChapter 5 / Lesson 9
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